The construction industry scheme (CIS) was devised in the early 1970s to limit the amount of tax lost as a result of under-declarations or failures to notify chargeability by subcontractors, many of whom came to work in the UK for relatively short periods without paying any tax.
The scheme operates to withhold tax at source at the point of payment, thereby reducing the risk of a subsequent default by the subcontractor. Although, if the subcontractor can prove he has complied with his tax obligations, he is able to receive payments gross. CIS potentially requires deductions to be made at source from payments due to self-employed subcontractor construction businesses, a feature which is unusual within the UK tax system.
The scheme has undergone regular changes since its inception and the current regime came into effect on 6 April 2007.
For the interaction between the quarterly reporting requirements for employment intermediaries and CIS, see the end of this guidance note.
Construction industry scheme
In order to discuss CIS, it is important to define the terms.
Contractors
Only contractors are
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